Statutory Code: Former pubs minister calls for free-of-tie option

By John Harrington

- Last updated on GMT

Related tags: Statutory code, Open market rent, Landlord

Bob Neill is a former pubs minister
Bob Neill is a former pubs minister
A former Government minister for pubs has urged Business Secretary Vince Cable to go further under the proposed statutory code of pub companies and give tenants the right to have a free-of-tie option combined with an open market rent review.

In a letter Cable ,​ Conservative Bob Neill MP said the statutory code “proposes a formulaic approach, but in my view this fails to address any issue but rent on a specific day”.

Among other things, the proposed statutory code includes giving tenants the right to request an open-market rent review under certain conditions.

Pubs minister

Neill, who was pubs minister under the Coalition Government from 2010 to 2012, wrote: “The tied model offers terms to a pub owning company that, if abused, can financially ruin a licensee in a very short space of time. We have seen countless examples of how this undermines the viability of certain community pubs, allowing the larger pubcos to justify disposing of their freehold interest in the land.

“In light of this, I fell that a so-called market rent only option (a free of tie option, with an open market rent review) offers the only mechanism that can transform the fortunes of thousands of landlords across the country. It is a commonsense, market-based solution that has been recommended by successive BIS [Business, Innovation & Skills] Committees, and I would urge your department to amend the draft statutory code accordingly.”

Voluntary

Neill said a free-of-tie option would be “entirely voluntary” but “would give struggling licensees a far stronger position when negotiating terms with the major pubcos”.

“If, for example, the agreement does not adequately compensate a licensee for the disadvantages of being tied, then they may sever the tied purchasing obligations and, instead, choose a market rent only agreement with no commitments to purchase products from their pub owning company.

“In other words, a fair and reasonable set of tied agreement terms will be the salvation of the tied model and ensure its future, whereas abuse of those terms will see its demise.”

Self-regulation

The MP for Bromley & Chislehurst said pub companies have “been given every opportunity to effectively self regulate” but have “shown remarkably little enthusiasm to do this”.

“In light of this, and given the serious threat that the tied model can pose to struggling licensees, it is entirely reasonable that the Government now intervenes.”

Related topics: Legislation

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